CMS Energy Corp.

The stable rating outlook on CMS Energy reflects our expectation that management will continue focusing on its core utility operations and reach constructive regulatory outcomes to avoid increasing business risk. The outlook also reflects our base-case forecast level of CMS Energy's consolidated funds from operations (FFO) to debt of about 14%, in line with the lower end of the range for the significant financial risk profile category. We could lower the rating on CMS Energy if its business risk profile weakens because of less regulatory support or a material increase in nonutility operations. We could also lower the rating if core financial measures consistently underperform our base-case forecast and remain consistently at less credit-supportive levels, including consolidated FFO to debt

...Recent hybrid security issuances provide cushion to weakening financial metrics due to the effects of tax reform. CMS Energy Corp. issued about $1.1 billion in junior subordinated notes in 2018 and 2019, which S&P Global Ratings has classified as hybrid securities with intermediate equity content (50%). These measures have partially supported the company's ability to finance its robust capital spending without significantly weakening its financial metrics. CMS Energy has exposure to carbon emissions through its heavy reliance on natural gas and coal generation.While most of the company's electricity is generated from natural gas (about 40%) and coal (about 25%), the company has a long-term plan to significantly reduce its carbon exposure by 90% by 2040. In line with the company's investment strategy, we expect that subsidiary CMS Enterprises will continue to invest in the development of renewable generation. The company's most recent investments include its 105-megawatt (MW) wind generation...

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